Imation: Fiscal 1Q12 Financial Results

Imation Corp. released financial results for the quarter ended March 31, 2012.

The company reported Q1 2012 net revenue of $281.7 million, down 11.0 percent from Q1 2011, an operating loss of $8.9 million including restructuring and other charges of $1.3 million, and a diluted loss per share of $0.33. Excluding restructuring and other charges, Q1 2012 operating loss would have been $7.6 million and diluted loss per share would have been $0.29.

Imation president and CEO Mark Lucas commented: "We are midway through our strategic transformation and we continue to execute on the initiatives that we laid out in early 2011 and again during our February investor meeting. These actions are designed to build a platform for long-term growth and improved operating margins and first quarter results were in-line with our expectations."

"Traditional storage revenues, including optical and magnetic tape media, declined as expected. Optical media decreased 13 percent and magnetic tape 6 percent."

"While revenue in secure and scalable storage was flat for the quarter, we had several products that showed strong growth. Our Mobile Security products continue to ramp up in revenue growth and gross margins, and our RDX products continue to gain revenue momentum with growth in excess of 40 percent over our first quarter last year. This revenue growth was offset by declines in revenue from commodity flash products, which was affected by unexpected market place price degradation during the quarter. Gross margins for secure and scalable storage rose 6.6 points to 20.1 percent of sales compared with the same period last year."

"While audio and video information was down during the quarter, much of this stemmed from video product rationalization. We plan to launch several new products which, along with our recently introduced products, are expected to drive new revenue at improved gross margins in this category. Gross margins for AVI rose 4.3 points to 17.5 percent of sales compared with the same period last year."

"We are making progress in our transformational strategy as shown by our overall gross margin performance of 19.9 percent, up 2.8 points from our first quarter last year. We remain focused on our goal of returning Imation to revenue growth as we exit 2012," Lucas concluded.

Q1 2012 Results compared with Q1 2011
Net revenue for Q1 2012 was $281.7 million, down 11.0 percent from Q1 2011.

From a regional perspective, Americas revenue decreased 12.1 percent, Europe revenue decreased 6.3 percent, and North Asia revenue decreased 8.0 percent. South Asia revenue decreased 20.9 percent primarily due to lower revenue from lower margin commodity products in secure and scalable storage.

Gross margin for Q1 2012 was 19.9 percent. Gross margin was positively impacted by a shift in product mix to higher gross margin products along with improved gross margins in secure and scalable storage and audio and video information. Gross margin for Q1 2011 was 17.1 percent, 17.4 percent excluding inventory write offs of $1.2 million which were part of the Company’s restructuring programs (see Tables Five and Six).

SG&A expenses for Q1 2012 were $57.3 million, up $7.1 million compared with Q1 2011 expenses of $50.2 million due primarily to the additional ongoing SG&A expense related to Imation’s acquired businesses and acquisition-related intangible amortization.

R&D expenses for Q1 2012 were $6.4 million, up $1.7 million compared with Q1 2011 expenses of $4.7 million primarily as a result of the company’s investment to support growth initiatives.

Restructuring and other charges were $1.3 million in Q1 2012 compared with $0.9 million in Q1 2011.

Operating loss was $8.9 million in Q1 2012 compared with an operating loss of $3.4 million in Q1 2011. Excluding the restructuring and other charges, adjusted operating loss would have been $7.6 million in Q1 2012 compared with adjusted operating income on the same basis of $0.3 million in Q1 2011.

Income tax provision was $1.0 million in Q1 2012 compared with $1.7 million in Q1 2011. The 2012 income tax provision relates to the tax provision outside the United States. The company maintains a valuation allowance related to its U.S. deferred tax assets and, therefore, no tax provision or benefit was recorded related to its 2012 U.S. results.

Loss per diluted share was $0.33 in Q1 2012 compared with $0.19 in Q1 2011. Excluding the restructuring and other charges described in Tables Five and Six for non-GAAP measures, adjusted loss per diluted share would have been $0.29 in Q1 2012 compared with adjusted loss per diluted share of $0.10 in Q1 2011 (see Tables Five and Six).

Cash and cash equivalents ending balance was $216.2 million as of March 31, 2012, a decrease of $6.9 million during the quarter.